Most banks are uninterested

According to CIM managing director Jacob Haar, the partnership with CircleUp fit right into his firm’s sweet spot. “Most banks are uninterested… in lending to small businesses,” Haar said. And many of the lenders that are available for those companies aren’t always transparent. CircleUp wanted to do what few banks in the industry were willing to do, which is provide reasonable and responsible lending products to help small businesses grow.

Because it plans to recycle the credit as borrowers repay their loans, Haar expects that credit line to fund more than $100 million worth of cumulative loan originations. And $20 million is just the start — if the pilot goes well, CIM or another partner could increase CircleUp’s credit facility over time.

Already, CircleUp has issued 50 loans to CPG borrowers, and it expects to do about 200 over the course of the year. One of those early borrowers was Carlos Ramirez, founder of Powerful Yogurt, a maker of high-protein yogurt, yogurt drinks and oatmeal for consumers with an active lifestyle.

Powerful Yogurt had previously raised $2 million in equity financing through CircleUp, but when it came time for Ramirez to invest more into his business, he didn’t want to dilute himself further.

“Raising equity is very expensive,” Ramirez told me. By contrast, he said the process of borrowing money was easy and transparent. “Now I’m able to fund my working capital with this, which is what i wanted to do from day one,” he said.

Now that its trial has proven successful, CircleUp is expanding its credit product even further. With more than 17,000 companies having already applied to its investment platform and millions of data points to help evaluate them, the lending option is well on its way to providing a much lower-cost way of raising working capital for consumer brands.